Personal Insolvency Agreements

If you can not pay your debts as and when they fall due, a Personal Insolvency Agreement may help.  A Personal Insolvency Agreement is a legal insolvency agreement where creditors agree to accept a “best offer”.   Formalising this “compromise” in a Personal Insolvency Agreement gives security to both parties. Personal Insolvency Agreements are regulated through the Commonwealth agency, ITSA.  Personal Insolvency Agreements provide you with certain protections:

• Creditors can’t contact you.
• Creditors can’t enforce any court imposed remedies (garnishees, bankruptcy).
• Interest charges are frozen.
• Prevents bankruptcy

Am I eligible to apply for a Personal Insolvency Agreement?

To be eligible for a PIA, you must fall outside of the Debt Agreement criteria;

• Do you earn more than $1,375.77 per week after tax
• Do you owe more than $95,386.20 in unsecured debt?
• Do you have more than $95,386.20 in assets?

If any of the above applies to your situation, you may be eligible for a Personal Insolvency Agreement.

Features of a Personal Insolvency Agreement

Most Personal Insolvency Agreement are made up of a regular repayment made over 5 years.   The sale of assets can be proposed however, this rarely happens. The maximum creditors can receive is 100% of the current debt (no interest, or penalty fees).  The regular repayment is determined through an analysis of your budget ie what you can afford to pay. This amount will generally be less than your current repayments. Creditors must vote to accept your agreement.

The Process for a Personal Insolvency Agreement

• Your financial situation will be explored to determine how much you can afford to repay.
• Legal documents will be drawn up (a “188 Authority, Statement of a Affairs and a Personal Insolvency Agreement).
• A meeting of creditors will be held.
• Creditors vote on the Personal Insolvency Agreement.
• Regular repayments are made to your Trustee who distributes the money to creditors.
• The Personal Insolvency Agreement is finalised.

Consequences

• The fact that you enter into a Personal Insolvency Agreement will appear on your credit history for 7 years.
• Your name will appear on the NPII, a permanent government record typically not used for assessing credit applications
• After you repay your Personal Insolvency Agreement your credit history will be updated.
• All included debts in the Personal Insolvency Agreement will be closed
• Can not be a company director
• A Personal Insolvency Agreement is a declaration of insolvency.  Creditors could potentially use this to make you bankrupt, our experience is that this is unlikely.

Personal Insolvency Agreements are a complicated financial area. If you feel that a Personal Insolvency Agreement may be a solution for you, it’s important that you call Debt Mediators Australia today.